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The BCBS has issued this supplemental note to the Committee’s 2014 guidance, External audits of banks (2014 guidance) to contribute to the high-quality audit of banks. This note deals with the audit of the expected credit loss (ECL) accounting estimate within the overall financial statement audit. ECL frameworks bring significant change for banks and their external auditors. High-quality implementation and ongoing application requires considerable effort from all involved parties – management, audit committees and external auditors.

This supplemental note will help banks’ audit committees in their role of overseeing banks’ external audits (including the audit work on ECL), which is one of their key responsibilities. The note sets out the Committee’s expectations for the external auditor, alongside questions that an audit committee may ask the external auditor, and also elaborates on those expectations in the context of key components of ECL.